The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [281]
“How about moving to Buffalo?” Buffett asked Lipsey. “I don’t really want to do that,” Lipsey replied. Buffett said nothing, and Lipsey continued commuting.
By mid-1979, the stock market was sunk in gloom, and orders for stocks, Buffett said, were placed “with an eyedropper.”35 The Dow had languished for a decade, bucking and stalling in snorts and gasps, like a beat-up car with a faulty carburetor. Its latest stall-out took it back down to the familiar territory of the mid-800s. Gerald Ford’s replacement in Washington, Jimmy Carter, wore Mister Rogers sweaters to promote energy conservation; it backfired, and he seemed to embody the United States’ impotence in dealing with Iran, where the Ayatollah Khomeini had deposed the Shah. The empress would no longer waltz around the dance floor at the Iranian Embassy. A partial meltdown at the Three Mile Island nuclear plant released radioactive material into the atmosphere; inflation galloped at double digits; and lines formed at the gas pumps. BusinessWeek declared “The Death of Equities,” as if no one would ever buy stocks again. A mood of deep pessimism settled on the country.
Investors piled into gold, diamonds, platinum, art, real estate, rare coins, mining stocks, feedlot cattle, and oil; “cash is trash” was the watchword of the day. High school girls wore necklaces made of Krugerrand coins. A brash new trustee at Grinnell, Steve Jobs, protégé of the esteemed Bob Noyce, tried to talk the investment committee into selling all the stocks and buying gold.36 An engineer in his mid-twenties, Jobs was obviously a very smart guy, but the investment committee demurred, and Grinnell did not buy gold.
In Forbes, Buffett wrote the opposite: It was time for investors to buy stocks. “The future is never clear,” he wrote; “you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.”37 He was the buyer of long-term values—except that he had no cash. Periodically, cash had showered on Buffett since the beginning of the decade—$16 million from distributing the partnership assets, then millions more from the sale of Data Documents stock, a private investment. But he had poured it all into Berkshire Hathaway. Buffett wanted money to invest. He had always paid himself only $50,000 a year, a number that he now raised to a still-modest $100,000. He borrowed some money from banks and started to invest again.
And finally, Stan Lipsey made the move Warren had been hoping for. One day in 1980 Lipsey showed up at Warren’s unlocked back door in Omaha to say that his wife, Jeannie, wanted a divorce and that her lawyer was, from Stan’s perspective, raising hell. Buffett reminded Lipsey of something Tom Murphy had taught him. “You can always tell them to go to hell tomorrow, Stan,” he said. He invited the sparring lawyers to his office and helped mediate the end of a marriage between his friends—the second time he had done so. Not long before, Buffett had brokered peace between his friend Ed Anderson and his wife, Shirley Smith Anderson, an old friend of Warren and Susie’s who had been Doris’s “sorority mother.” He was experienced at easing his friends through difficult transitions. He began talking to Lipsey about the need to make changes in his life. Maybe it’s time, Stan thought. As the conversation progressed, Buffett helped Lipsey talk himself into moving to Buffalo. “It was typical Warren. He wanted me to come up here in the worst way,” but in the end, just as with people investing in the partnership, it had to be Lipsey’s idea.
Lipsey went to Buffalo, and stayed. Every Friday night, he called and gave Buffett the latest “horrible numbers,” and each time, no matter how bad the news, Buffett remained encouraging and upbeat, thanking him for calling. “It was sort of mind-blowing,” Lipsey says.38 By the end of 1980, the losses had mounted to